Short morning update

Good morning - hope everyone had a relaxing 3-day weekend.  I certainly did.  Meant to spend more time on this blog, but the weather was so incredible that I just couldn't get myself to spend anytime inside on the computer.

Below is the SPY daily chart from Friday's close at 110.89.  Currently futures are down and the SPY is trading in the pre-market at 110.20 at the time of this posting.

-click to enlarge-

So as mentioned on Friday, the market bounced back up into the resistance range that I had been targeting for re-entering short positions - which I did.  I also kept my position size rather small, as the bulls seem to have a lot of momentum behind them...at least over the last three days, and if they really get up a head of steam, you don't want to be standing in the way of that train with a portfolio loaded with shorts.  So, as previously mentioned, I'm in a small position with stops in place just above the June highs.   If we end up selling-off below 1080 on the S&P, I will add to this position, and move stops to entry on my initial position.

I was talking with a friend last night about the markets and he asked me why I seem to be fixated on the short side, and not willing to take a long position.  A fair question, so I figured I'd post on it today, in case anyone else was wondering the same.

So here's the SingleMalt rationale for my bias and trading style.

1.  First off, I do trade both long and short on an intra-day basis, so I'm not a total bear. :)
2.  Overall, I see a lot more negative in the US and Global economies than I do positive.  All of this talk of recovery and improvement has been nothing but government induced fluff via trillions of dollars in stimulus, not organic growth.  That's just the way I see it. 
3.  The aforementioned stimulus program was hugely responsible for the run-up in stocks since March 2009, and since the majority of these stimulus initiatives have expired, we are seeing most economic indicators rolling over and getting worse.
4.  Until we see either signs of a true, organic recovery, or until we see another massive round of stimulus by the govt., I don't see a fundamental reason to be in long positions.
5.  When it comes to holding positions for more than a day trade, I consider the risk to be too high in this type of market when it comes to bullish/long positions.   There are, in my opinion, simply too many bad things that can occur overnight or over the weekends that could cause a huge drop across the U.S. equities markets, and since I trade mostly options, my positions would be wiped out by a 200-300 point gap down on the open.  What do I mean when I say, "too many bad things"?  Well, all you have to do is follow the international news and you'll see plenty of things that could happen....how about a sovereign default by Greece or Ireland, or an all out attack by Iran on Israel or vice-versa?  These are the types of events that could take our markets down in a hurry, and I think the probability of bad things happening now is higher now than it has been over the past several decades.  And clearly, I'm not the only one to think so, as mutual funds have shown a net outflow of over $50billion in the past 6 months, and have been bleeding out for the past 17 weeks straight.  I'll post a link to that stat later, but it's a fact.  Very few people have any faith in this market on a long term basis.  If you're a trader and are watching the action all day, every day, you can do well, but for people on Main Street with 401k's, the risk is too high for a buy and hold strategy, and the record redemptions we've seen over the past 17 weeks is proof of this.

So bottom line, show me a real recovery, or show me another stimulus program, and I may get more bullish, but in the meantime, my bias is bearish.

Good luck trading.